ABSTRACT:
This paper investigates the consequences of an exogenous increase in U.S. government purchases. We find that in response to such a shock, employment, output, and nonresidential investment rise, while real wages, residential investment and consumption expenditures fall. The paper argues that a simple variant of the neoclassical growth model which distinguishes between nonresidential and residential investment is consistent with this evidence.

Federal Reserve Bank of Chicago. Research Department
and Federal Reserve Bank of Chicago. "Understanding the Effects of a Shock to Government Purchases, Working Paper 1998-07" in Working Papers (Federal Reserve Bank of Chicago)
(August 20, 1998).
https://fraser.stlouisfed.org/scribd/?item_id=533530&filepath=/files/docs/historical/frbchi/workingpapers/frbchi_workingpaper_1998-07.pdf, accessed on February 22, 2018.